PCI council enlightens mobile payment security debate

Since its inception in 2004, the Payment Card Industry Data Security Standard (PCI DSS) has been a vital consumer protection mechanism providing merchants with prescriptive advice on how to prevent, detect and respond to security incidents that disrupt payment processing procedures. This week, the PCI Security Standards Council (PCI SSC) has released a set of mobile payment security best practices in an effort to reassert its role in the digital marketplace and continue to serve its stakeholders with the most up-to-date insight available.

The rise of mobile payments

With smartphone owners now officially representing more than half of all mobile subscribers in the United States, consumers that use their cell phones exclusively for calling and texting are a dying breed. As Internet-enabled devices become further ingrained in our day-to-day lives, the mobile touchscreen in becoming the focal point for a greater number of consumer activities. Perhaps the most notable development taking place is the growing perception of the smartphone as a tool of commerce rather than a gadget of convenience.

In a recent survey of more than 2,000 American adults conducted by location-based marketing specialist Placecast, these attitudinal adjustments became readily apparent. From product research to payment processing, researchers saw smartphones becoming the keystone of the modern shopping experience. By the end of 2011, 20 percent of all mobile users – approximately 39 million individuals – had completed a financial transaction from their phones. Moving forward, approximately six in 10 smartphone owners suggested that it is at least somewhat important that they be able to make a purchase from their device.

"Just as purchases of smartphones have been booming in recent years, so too have purchases using smartphones," said Placecast CEO Alistair Goodman. "In just two years, we saw that interest in making purchase via mobile increased by eight percent – meaning that millions of American are recognizing the convenience of using their phones for shopping."

A separate study released by electronic payment experts at ACI Worldwide recently added a global dimension to the mobile payment phenomenon. In fact, researchers noted the rise of an entirely new demographic of consumer: the "smartphonatic."

According to ACI, approximately one-fourth of consumers around the world can be categorized into this emerging market segment. Within this distinct group, 80 percent of members have conducted mobile banking and 70 percent have completed a mobile payment. China and India boast the densest populations of smartphonatics, with the U.S. and Western Europe trailing at a bit of a distance. But across the board, analysts suggested that this unique fraternity represents an "agent for change" that will soon force the hands of financial and retail institutions.

Recognizing the risk

As the traditional data security concerns of credit card payment processing converge with the hazards of the mobile frontier, some see the perfect storm brewing on the horizon. A notable chasm between cybercriminal capabilities and defense strategies has already emerged as the breakneck pace of smartphone and tablet innovation has forced security administrators to learn on-the-job. What's more, mobile platforms continue to serve as the playground for relatively young technologies – like social media and near-field communication (NFC) – that are still refining their own security credentials.

The bundling of mobile technology and financial data could also broaden the scope of data privacy threats.

According to Geiger, the ability to essentially create a detailed profile on every customer a merchant comes in contact with tends to be the primary value proposition presented by mobile payment services like Google Wallet and others.

PCI SSC steps up to the plate

The newly released fact sheet from the PCI SSC should help companies chart a course for success as they struggle to balance convenience and compliance in the mobile era.

"We know merchants are eager to take advantage of their existing smartphones or tablets to accept payment cards," PCI SSC general manager Bob Russo explained. "We're excited about this easy-to-use reference that will help merchants understand how to use the suite of PCI standards to enable their business while still keeping data security top of mind."

The first recommendation provided in the educational report is for merchants to adopt a validated point-to-point encryption (P2PE) solution that essentially cloaks cardholder data before it makes the jump from mobile device to the point-of-sale (POS) system. This significantly reduces the functionality of any data intercepted by an opportunistic cyberthief while information is in transit. Business should also ensure that their PIN entry device or card reader is properly fortified with compliant safety protections.